Why Diesel Prices Reached a Record High

Crude oil has not broken its record. Diesel has.

An unusual outcome: only diesel exceeded its historic peak

According to the EIA's weekly statistics, average U.S. retail diesel prices reached $6.285 per gallon in the week of September 8–14. That is the highest nominal diesel price since records began in 1994.

Gasoline, refined from the same crude oil, cost just $4.319 that week, still almost 70 cents below its own record. Crude oil itself was not at a peak either: WTI spot was $107.02 on September 15, more than $38 below its 2008 high of $145.31. Of these three key commodities, only diesel set a new record.

Crude oil is not the whole explanation: the pressure is in refining

The problem does not lie entirely in crude supply. U.S. commercial crude inventories stood at 423.4 million barrels, slightly above the five-year average.

Products refined from the same crude have performed very differently: gasoline prices rose 36% year on year, while diesel rose about 68%. The diesel price increase therefore cannot be attributed solely to crude oil.

One useful measure is the “crack spread,” which can be understood as the processing premium earned in refining. On September 15, the diesel crack spread reached $117.18 per barrel, compared with just $41.45 for gasoline. For the same crude input, the return from producing diesel was almost three times that from gasoline.

Put simply, crude oil itself has not surged to an extreme. The extra cost is in the refining stage.

Why not increase capacity?

U.S. refineries are already operating close to full capacity. Utilisation reached 96.8% in the week ending September 11, leaving almost no spare capacity.

Distillate inventories were 107.9 million barrels, 13% below the five-year average, and had remained low since April this year. With capacity stretched and inventories thin, even a small market disturbance can send prices higher.

Overseas supplies are also insufficient. Diesel exports from the Gulf oil-producing countries in the Middle East were just 390,000 barrels a day, roughly a quarter of their pre-war level. The International Energy Agency also noted that refineries elsewhere were doing all they could to increase throughput and capture strong refining margins.

Higher diesel prices feed through to other prices

Diesel is more than a price quoted on a screen. Nearly 80% of truck fuel in the United States is diesel. A rise in its price first increases freight costs, then passes through successive stages to the prices of various goods.

In the week ending September 14, diesel cost $1.97 more per gallon than gasoline. Across 2024, the average gap was only $0.46. Diesel is closely tied to the real economy. As long as its supply remains tight, the stubborn component of price pressures will be difficult to ease.

Three signals to watch

1. Whether the refining premium falls.

2. Whether diesel inventories recover.

3. Whether refineries can increase capacity.

Crude oil does not have to reach an extreme price for refined products to do so. In this round of oil-market divergence, diesel was the first to break out.